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Budget 2012: Microfinance Bill to be tabled in Budget session

E Kumar Sharma     March 17, 2012
The Indian microfinance sector heard the only news it was hoping to hear from the finance minister in the Budget. That the government proposes to table the Micro Finance Institutions (Development and Regulation) Bill, 2012 in the Budget Session of the Parliament brings to end speculation on when the bill would be finally tabled in the Parliament.

Though not all are in agreement with the provisions of the bill in its current form, the reason it is being awaited is the centrality of the regulatory powers it provides for. This will leave little scope for interventions by state governments (like the one that happened in Andhra Pradesh). The Microfinance Institutions (Development and Regulation) Bill will make Reserve Bank of India, the sole regulator of the Indian microfinance sector.

The interest subvention to women self help groups is seen as yet another positive in the budget though all do not agree on the end outcome. There is a feeling that it could show up as perverse incentives and perhaps even be a source of more tension between the microfinance institutions (MFIs) and the Self Help Group models (SHG-bank linkage) within the Indian microfinance sector.

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